One of India's largest technology outsourcing companies, Satyam Computers, on Wednesday admitted cooking its books and committing other grave financial wrongdoing to inflate profits over several years. The revelation shook India's stock market and sent shock waves across the country's booming software industry, while television commentators quickly dubbed Satyam "India's Enron."
The $2 billion software giant is India's fourth-largest information technology firm, with over 53,000 employees. It services many Fortune 500 companies, and is also registered on the New York stock exchange.
Chairman and founder B. Ramalinga Raju took responsibility for the fraud and resigned in a letter he submitted to Satyam's board. The letter said that the company lied about profit and revenue for several years, inflating revenue by 33 percent and profits more than tenfold between July and September of last year.
Raju apologized to the company's stakeholders and said that none of the other board members had any knowledge of the financial fraud.
The beleaguered Raju, who had been in the news recently for a controversial acquisition fiasco, said that every attempt to eliminate gaps in the balance sheet and fill the "fictitious assets with real ones" and "non-existent cash" failed.
"It was like riding a tiger, not knowing how to get off without being eaten," he wrote in the letter. " . . . I am now prepared to subject myself to the laws of the land and face consequences thereof."
Financial observers expressed fears that there may be skeletons hiding in the books of other Indian technology companies, casting doubt about the celebrated Indian outsourcing industry and oversight of its companies. Observers worried that the scandal could erode the confidence of overseas clients.
The National Association of Software and Service Companies in New Delhi issued a statement calling Satyam "a stand-alone case of failure of corporate governance" that is not a "reflection on the industry or corporate India".
Ironically, Raju had received the "entrepreneur of the year" award in 2007 from the consulting firm, Ernst & Young. The Council of the Institute of Directors said it will be withdrawing the Golden Peacock Global award for best corporate governance that it gave Satyam in 2008.
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BTW, Satyam means “truth” in Sanskrit...
I guess the World Bank had it right all along.....
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